TMBA 440: What's Your Lifestyle Ladder?

Dan and Ian know that today’s episode is about a rather sensitive subject.

Not too many people in American society feel comfortable talking about their personal finances. It’s somehow taboo to share how much money you are making, or to speak freely about your financial position.

Maybe this is part of the reason that so many entrepreneurs don’t open up about selling their businesses. They think that nobody wants to hear them complain about how much money they made.

In this week’s podcast, we aren’t holding back. Dan and Ian share how they feel about money, how much money they want, and what actual financial freedom looks like to them.

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Americans are definitely more private/shy when it comes to talking about money (but ironically they’re not shy flashing the “lifestyle” on social media, which is quite often based on debt, but that’s a whole separate discussion).

This was episode was a good first stab at the topic. Of course, the numbers will vary quite a bit from person to person, especially based on where they live and cost of living. For example, $100-250K isn’t much in Southern California.

instead of thinking of those figures in absolute dollar terms, what I’ve found to be helpful is to think of it in terms of Time. A typical business cycle and cycle in the stock market is 5-8 years. So, take your monthly expenses, and try to keep a few years of expenses in the bank. How many years will vary by person. If your monthly expenses are $10K, then $250K is just a couple of years of expenses. How many years of expenses to keep in savings will also vary person to person. You can look at monthly income the same way. Look at what multiple of your expenses are you pulling in.

Much needed episode. Any personal finance content by you guys is GOLD. Entrepreneurmobile was a hallmark blog post and this episode is even better.

To really sear this into my head (and the other listeners as well), here’s the summary version to review:

Step 1: Being in Debt
– Less-than-0 net worth
– Majorly debilitating state putting a huge drag on you (usually due to credit cards, student loans or irresponsible car purchases)

Step 2: Being Broke
– 0-20K
– Free from the crushing mental strain of being in debt, but still living very lean

Step 3: Basic Savings
– ~20-40K –> 100K
– Can start making moves (changing job) / hustling / etc. In my view, this is the first stage where you can realistically start taking risks (which obviously lead to major rewards for entrepreneurs)

Step 4: Platform Level
– 100-250K + Biz generating lifestyle cashflow
– First taste of “maxiumum lifestyle” (don’t need to worry about a restaurant bill, vacation accomodation, etc). Major purchases (like a porsche) can still F you over, but by nature of having made it to step 4 you are less at risk that someone at step 3 for making that kind of mistake.

Cheers Ben thanks for that! Since we’ve published a lot of folks have helped us to refine this idea, so perhaps we do more on it in the future. I really enjoy it as well and feel like I have a lot to learn as bossman is much better at this stuff than I am.